Can a member with 70 % shares decides to liquidate a close corporation?
When a member with 70 % shares decides to liquidate a close corporation, what happens to the other members that have 10 % shares each? Does the majority shareholder liquidate the company on his own without consulting the other 3 members? Does the other 3 members have to sign off on the liquidation? Will all staff be retrenched and contracts cancelled or should the staff be reinstated under a new company name?
All depends on your articles of association when the company was registered at CIPC. It should stipulate the percentage of votes needed to voluntarily liquidate a company. If it says 70 per cent or less then he will have the power to liquidate. If higher, then he would have to get support of other members at a shareholders meeting where a resolution is passed. If a company is liquidated it no longer exists and staff will have to be retrenched. Contracts are voided and debtors are paid according to a percentage of what is left of the company. If it’s sold then it can be done with staff and existing contracts. The liquidation can be challenged by the other 3 members in court.